Carclo board changes as full year targets likely to be missed

Carclo plc ("Carclo" or the "Group"), a global manufacturer of fine tolerance injection moulded plastic parts mainly for the medical, automotive lighting and optics markets, issues this trading update for the year ending 31 March 2019.

Trading Update

Wipac, the main operating business in the Group's LED Technologies Division, has been very successful in winning low-volume automotive lighting programmes together with more recent wins in the mid-volume range. As reported at the half year, a large number of these low-volume programmes have been launched into production this year and the business initially struggled to meet customer requirements. Unfortunately, this situation worsened in the third quarter as the short term operational growing pains continued longer than we had anticipated as demand grew. The consequences of this have been significant with adverse operational variances, expedited freight deliveries and poor customer service leading to additional unplanned costs and, very recently, to delays in new programme awards and the profit recognition thereon.

Progress is being made in reducing the customer order backlog through increased Group Management focus, additional machine capacity coming on stream and experienced consultants assisting to develop new ways of working. The Board expects this development process will take some time to complete. The additional costs are expected to gradually decline over the coming months as the new ways of working are embedded into the business. However, the on-going nature of these costs, combined with the loss of profit recognition on the delayed new programme awards, means the profitability of the LED Technologies Division is now expected to fall significantly short of our previous expectations for the current financial year.

In Technical Plastics, solid progress has been made since the half year with the planned operational improvement programme delivering encouraging results, albeit at a slower rate than anticipated. As a result, full year operating profits for this Division are now expected to be broadly similar to the prior year with the second half much improved over the first.

Our smaller Aerospace Division continues to perform slightly ahead of expectations and well ahead of the prior year.

Overall, given the significant challenges encountered in the LED Technologies Division, the Board now expects the Group results for the full year to be significantly below its previous expectations with the second half performance anticipated to be similar to that achieved in the first half. The Board's outlook assumes that planned project milestones are met and planned new programmes are awarded before the end of the financial year and that any one-off costs associated with reorganising the Wipac operation and rectifying its performance are treated as exceptional costs.

The Group year end net debt position is anticipated to be slightly above the level seen at the half year. This is higher than previously anticipated due to a delay, until after the year end, in receiving customer approval for tooling on a major mid-volume contract. Group net debt is expected to remain within our banking covenants at the newly anticipated profit level.

The Group will announce its results for the year ended 31 March 2019 on Tuesday 4 June 2019.

Board Changes

Given these developments, the Board believes that delivering the required operational improvements in the LED Technologies Division and successfully launching Wipac's mid-volume programmes is critical to the future success of the Group. Accordingly, Chris Malley, Group Chief Executive, who has been instrumental in driving the recent improvement in customer arrears at Wipac, has agreed to focus all his efforts on this task and to take on the role of LED Technologies Divisional Chief Executive with immediate effect. As a consequence, Chris has today resigned as Group Chief Executive and from the Board of Carclo plc. The Chairman, Mark Rollins, will assume the role of Executive Chairman until a new Group Chief Executive can be appointed. An executive search firm to lead this recruitment process will be appointed by the Board shortly.

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